Reported EPS for the first quarter of 2008 were $0.93, an increase of 8% over reported EPS of $0.86 in the first quarter of 2007, which included $61 million of non-recurring brand and debt redemption costs.
"Difficult capital markets, global credit pressures and currency headwinds persisted during the quarter and moderated the Company's financial results," said Donald A. Stewart, Chief Executive Officer. "Sun Life has consistently reported strong returns, and an important measure of our success is our continuing ability to manage through difficult times. All of our stakeholders can be confident that we are responding to the turbulent economic forces confronting us."
"Our earnings this quarter are a reflection of the current environment," said Richard P. McKenney, Chief Financial Officer. "We remain confident in our capital flexibility and ability to deliver shareholder value."
Earnings year over year were impacted by the strong performance of the Canadian dollar relative to foreign currencies since the first quarter of 2007, which reduced operating EPS by $43 million or $0.08 per share. Excluding the impact of currency operating EPS would have grown by 5% to $1.01.
Business Highlights
During the first quarter of 2008, the Company progressed on a number of its strategic objectives and continued to deliver on its growth and distribution expansion strategies in each of its markets.
Sun Life Financial Canada (SLF Canada)
- Individual segregated fund sales in Canada, including sales of SunWise Elite Plus Guaranteed Minimum Withdrawal Benefit (GMWB) rider, increased by 29%(3) to $587 million in the first quarter of 2008 over the same period last year. Building on this momentum, Sun Life Financial further enhanced its GMWB product during the quarter by introducing a lifetime withdrawal option on the SunWise Elite Plus segregated funds rider.
- Individual Insurance and Investments solidified its leadership position in health insurance finishing the year with the No. 1 positions in Long-Term Care Insurance and Critical Illness Insurance.
- Group Benefits achieved the highest year-over-year increase in in-force business in the industry in 2007 according to the recently released Benefits Canada Group Insurance Report, and is now solidly positioned as the No. 2 group insurance provider in Canada.
- Group Benefits has been selected by the Ontario Medical Association (OMA) as the insurer for its optional health plan for physicians. The plan will be available to more than 20,000 physicians currently practicing in Ontario.
- Group Retirement Services continued to build on its success in the Defined Contribution (DC) industry in 2007 capturing 37% of the industry's new sales and 39% of total DC market activity, which includes new sales and retention activity, as recently reported by LIMRA.
- Group Retirement Services retained $181 million of assets from members leaving plans during the first quarter of 2008. This represents an increase of 10% over the same period last year and a retention ratio of 40% for the first three months of 2008.
Sun Life Financial U.S. (SLF U.S.)
- On May 5, 2008, the Annuities Division launched a new living benefit rider for its Sun Life Financial Masters Variable Annuity series, the Retirement Income Escalator(SM), which offers clients secure income for life with the option to maximize income by postponing withdrawal to a later age.
- SLF U.S.'s Bermuda operations launched its next-generation international unit-linked investment product, Sun Secured Advantage, offering high net worth clients in Latin America, Asia and the Middle East an innovative and flexible solution to help build, preserve and transfer their wealth with access to a wide range of investment options from around the world and competitive living benefit options.
- The Individual Insurance division continued its life product development initiatives, strengthening its variable universal life (VUL) portfolio with the introduction of Sun Protector VUL(SM) and enhancement of Sun Prime VUL(SM) for the high net worth market. The division also enhanced its Sun Universal ProtectorPlus(SM) with additional rider benefits including long-term care.
- In April 2008, SLF U.S. combined its Individual Insurance and Annuity divisions to create a single organization focused on the retail customer - the Retail Insurance and Annuity Division. In addition, SLF U.S. formed a new distribution organization consisting of its wholesale broker-dealer, Sun Life Financial Distributors, Inc., and the Employee Benefits Group division's distribution organization. These changes will enable SLF U.S. to leverage best practices, processes and efficiencies in serving its customers and distributors.
MFS
- MFS continued to achieve superior performance with 74%, 89% and 72% of its fund assets ranked in the top half of their Lipper Category Average over 3, 5 and 10 years respectively, as of March 31, 2008.
- MFS's pre-tax operating margin ratio was 35% in the first quarter of 2008 compared to 34% in the first quarter of 2007.
- MFS continued to invest strategically in new products during the first quarter of 2008, seeding three new Japanese Toshin funds as well as the MFS Meridian Global Conservative Fund.
- On March 3, 2008, USA Today named the MFS Value Fund a "Mutual Fund All-Star" in the 2008 edition of its annual Mutual Fund All-Stars feature. The fund was one of 6 funds included in the large cap category and was one of 20 funds overall to make the roster of "all-stars."
Sun Life Financial Asia (SLF Asia)
- Birla Sun Life Asset Management Company, the Company's mutual fund joint venture in India, was awarded Mutual Fund House of the Year for 2007 by CNBC - CRISIL, for outstanding mutual fund performance. Mutual fund assets under management were $9.5 billion at March 31, 2008, up 71% from a year ago.
- Birla Sun Life Insurance Company individual life insurance sales were up 133% over the first quarter 2007 from its increased distribution network of 339 branches serving 294 cities across India. Sun Life, along with its joint venture partner, significantly increased investment in Birla Sun Life Insurance during the quarter and made substantial progress toward having 600 branches operational in the near-term.
- In China, Sun Life Everbright Life Insurance Company (SLEB) received regulatory approval to open a branch in the city of Guangzhou in Southern China. The branch is expected to commence operations in the third quarter of 2008. Now operating in 17 cities in China, SLEB's individual life insurance first quarter 2008 sales were up 164% over the same period last year.
Financial Highlights
- Operating ROE decreased 10 basis points to 13.4% from operating ROE of 13.5% in the first quarter of 2007. ROE of 13.4% increased 140 basis points from ROE of 12.0% in the first quarter of 2007.
- Operating EPS of $0.93 for the quarter decreased 3% compared to operating EPS of $0.96 in the first quarter of 2007. EPS of $0.93 for the quarter increased 8% compared to EPS of $0.86 in the first quarter of 2007.
- Sun Life Financial declared $203 million in common shareholder dividends during the quarter, representing a payout ratio of 38%.
- Sun Life Financial repurchased approximately 2.4 million common shares for $110 million during the first quarter of 2008.
- Sun Life Financial's embedded value from operations increased by 17% and value of new business increased by 19% for the full year of 2007 over 2006, demonstrating the Company's continued commitment to delivering profitable growth.
- On January 30, 2008, Sun Life Financial completed a public offering in Canada of $400 million principal amount of Series 2008-1 Subordinated Unsecured 5.59% Fixed/Floating Debentures due in 2023. -- www.cnxmarketlink.com